Correlation Between Chemours and Summit Materials

Can any of the company-specific risk be diversified away by investing in both Chemours and Summit Materials at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Chemours and Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chemours Co and Summit Materials, you can compare the effects of market volatilities on Chemours and Summit Materials and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Chemours with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chemours and Summit Materials.

Diversification Opportunities for Chemours and Summit Materials

-0.59

Correlation Coefficient

Chemours  Summit Materials

Excellent diversification

The 3 months correlation between Chemours and Summit is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Chemours Co and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Chemours is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Chemours Co are associated (or correlated) with Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Chemours i.e., Chemours and Summit Materials go up and down completely randomly.

Pair Corralation between Chemours and Summit Materials

Allowing for the 90-day total investment horizon Chemours Co is expected to generate 2.6 times more return on investment than Summit Materials. However, Chemours is 2.6 times more volatile than Summit Materials. It trades about -0.05 of its potential returns per unit of risk. Summit Materials is currently generating about -0.29 per unit of risk. If you would invest  2,837  in Chemours Co on January 25, 2024 and sell it today you would lose (160.00) from holding Chemours Co or give up 5.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Chemours Co  vs.  Summit Materials

Chemours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemours Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Chemours is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Summit Materials

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Summit Materials may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Chemours and Summit Materials

The main advantage of trading using opposite Chemours and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chemours position performs unexpectedly, Summit Materials can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Summit Materials will offset losses from the drop in Summit Materials' long position.

The idea behind Chemours Co and Summit Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.